The White House today released the Economic Report of the President, a 456-page tome that chronicles the major forces driving the U.S. economy. The report compiled by the White House Council of Economic Advisers dives deep into both short-term factors and long-term trends influencing the economy’s path. In case you had plans for the weekend that don’t include reading the report, we picked out 10 key topics with our questions and the CEA’s answers. All charts are from the report.

1) Is the bleeding by state and local governments over?Perhaps, thanks to the housing market.

The trend: “Although State and local governments continued to experience fiscal pressure in 2012, the long contraction in the sector finally appears to be coming to an end. State and local consumption and investment (purchases) have shown unprecedented weakness compared with previous recoveries. From the end of the recession in mid-2009 to the fourth quarter of 2012, real State and local purchases declined 6.8 percent. By contrast, during the comparable period of each of the six previous recoveries, real State and local purchases posted positive growth, averaging an increase of 10.3 percent over the first three and a half years of the recovery.”

The slow rebound: “Current State and local government expenditures—which include transfers to individuals as well as government consumption—rose 2.8 percent over the four quarters of 2012, following a 0.2 percent increase in the previous year. A recent CBO report noted that the weakness in State and local government spending relative to previous recoveries could be attributed roughly equally to three different areas: hiring of employees, purchases of goods and services, and construction spending. Despite continued spending restraint across these major components, the operating position of State and local governments deteriorated to an aggregate deficit of $140 billion by the third quarter of 2012, on pace for a fifth consecutive year of operating deficits for the sector.”

2) Have house prices reconnected with rents?Almost.

“Following large declines from 2007 through 2011, housing prices bottomed out in early 2012, and rose 8.3 percent over the 12 months of the year, according to the CoreLogic home price index. Private sector housing experts expect house prices to appreciate at a 3.0 to 3.5 percent annual pace for the next several years. Because households have a choice between renting and owning a home, the price of new homes should increase in tandem with rental costs, at least over long periods of time. As seen in Figure 2-11, house prices increased to a level above parity with rents during the mid-2000s but descended to a level consistent with rents by the end of 2011.”

3) What should we do about climate change?Something that includes a market-based solution (like cap and trade), but you won’t see economists’ favorite tax — a carbon tax — on our list.

How White House economists put the problem: “From an economist’s perspective, greenhouse gas emissions impose costs on others who are not involved in the transaction resulting in the emissions; that is, greenhouse gas emissions generate a negative externality. Appropriate policies to address this negative externality would internalize the externality, so that the price of emissions reflects their true cost, or would seek technological solutions that would similarly reduce the externality. Such policies encourage energy efficiency and clean energy production. In addition, prudence mandates that the Nation prepare now for the consequences of climate change.”

The policy prescriptions: “This diagnosis of the market failure underlying climate change clarifies the need for government to protect future generations that will be affected by today’s emissions. Responding to the challenge of climate change leads to a multipronged approach to policy. Four such responses are implementing market-based solutions; technology-based regulation of greenhouse gas emissions; supporting the transition of the U.S. energy sector to technologies, such as renewables and energy efficiency, that reduce our overall carbon footprint; and taking actions now to prepare for those impacts that are by now unavoidable.”

4) How many family farms really pay the estate tax?Not many.

“In 2001, 16.9 percent of farm estates were required to file a tax return and less than 4 percent had an estate tax liability. By 2011, as a result of the generous tax-exemption amount and low tax rate, those figures had declined to 1.28 percent and 0.6 percent, respectively. Total tax liability in 2011 was also lower than it had been the prior 10 years, despite record high agricultural land value, which represents a large majority of the assets in a farm estate. The American Taxpayer Relief Act of 2012 made permanent a maximum estate tax rate of 40 percent; it also set the exclusion amount at $5 million and allowed for inflation adjustment, continuing the tax relief to most farm estates.”

5) What will the aging population mean for consumption?More spending on health care and housing, less on education and transportation, but the changes will be small.

“CEA projects that the aging population will lead average household consumption to decline over the next decade, with an implied reduction in the growth rate of consumer spending of perhaps 0.1 percentage point a year, relative to a benchmark in which demographics are held constant. … Many factors other than demographics will also influence future consumer spending. These factors include technological improvements, changes in income and wealth, and changes in the composition of households within demographic groups. In addition, changes in relative prices will affect the composition of spending. For example, if the price of health care increases relative to other areas, and if the demand for health care is insensitive to its price, then the share of spending on health care might be larger than these projections suggest.”

The problem: “Given the severity of the downturn … some commentators have hypothesized that the outsized decline in economic activity may have been inadvertently incorporated into the seasonal factors for several key economic indicators. And as a consequence of this statistical bias in the seasonal adjustment process, these observers have raised concerns that the pace of the current recovery has exhibited an abnormal seasonal pattern in which economic activity has appeared not only substantially stronger than it really is during the fall and winter but also correspondingly weaker during the spring and summer.”

7) What’s driving the slowdown in the growth of health care spending? It’s partly the recession and partly changes in the law, and would be a game-changer if the trend persists.

“The rate of growth in nationwide real per capita health care expenditures has been on a downward trend since 2002, with a particularly marked slowdown over the past three years. Since 2010, health care expenditures per capita grew at essentially the same rate as GDP per capita. As shown in Figure 1-5, this development is unusual, because growth in health spending has tended to outpace overall economic growth for most of the last five decades. Although some of the narrowing of this gap can be attributed to the effects of the recession, Chapter 5 presents evidence that structural shifts in the health care sector are underway, spurred on in part by the 2010 Patient Protection and Affordable Care Act (Affordable Care Act). If the recent trends can be sustained, the resulting lower health care costs will have a tremendously positive impact on employers, middleclass families, and importantly, the Federal budget. Indeed, if the growth rate of Medicare spending per beneficiary over the last five years persists into the future, then after 75 years Medicare spending would account for only 3.8 percent of GDP, little changed from its share today, and substantially less than what the Medicare Trustees estimate. This should not be interpreted as a forecast but rather an indication of how sensitive long-term projections are to the assumed rate of growth of Medicare spending per beneficiary.”

8) Is the decline in labor force participation that preceded the recession likely to persist?Yes.

“Although the recession caused a decline in the labor force participation rate, it is important to recall that even well before the recession, the labor force participation rate showed signs that it had reached its peak in the late 1990s. This fact largely reflected the aging of the population … and the plateauing of female labor force participation following four decades during which American society was transformed by an increasing number of women in the workforce. So while some discouraged workers are likely to reenter the labor force in the near term as the economy continues to heal, the long-term trend for the labor force participation rate is still likely to be downward. This likelihood was acknowledged in the 2004 Economic Report of the President, which noted, “the long-term trend of rising participation appears to have come to an end. . . . The decline [in the labor force participation rate] may be greater, however, after 2008, which is the year that the first baby boomers (those born in 1946) reach the early-retirement age of 62.”

9) What’s causing the slowdown in women’s labor force participation?It’s not just about their job prospects.

The trend: “Among women born between 1936 and 1945, labor force participation is moderately high at younger ages, drops during the peak child-bearing years, exhibits a subsequent reprise in mid-life, and finally declines as retirement approaches. The curve tends to rise across successive generations of women, indicating higher participation rates for each successive cohort, and the dip associated with child-bearing ages has largely disappeared. The rise in participation, however, appears to have stopped with the most recent generation. Given this pattern across birth cohorts, it is difficult to be optimistic about future increases in the labor supply of prime-age women. New birth cohorts work no more than the immediately preceding cohort at the same ages, and it is therefore unlikely they will work more at later ages. The gains during the 1970s and 1980s achieved from the increased participation of married mothers appear to have come to a standstill and perhaps even partially reversed.”

Part of the answer: “One candidate explanation— that labor market prospects have declined for women in the 2000s—cannot be the whole story, since participation has fallen even among groups for whom average wages have risen. For example, according to one recent investigation, the average weekly wage of women aged 25–39 with a college degree increased 2.4 percent from 1999 to 2007, after adjusting for inflation, even as the share of this group who are employed fell 3.0 percentage points … The one subgroup of women most likely to have been affected by declining labor market prospects is never-married mothers, a population that tends to have lower levels of education and correspondingly lower wages.”

10) Why is labor’s share of the economy falling?Technology and globalization, among other factors.

The problem: “The ‘labor share’ is the fraction of income that is paid to workers in wages, bonuses, and other compensation. … The labor share in the United States was remarkably stable in the post-war period until the early 2000s. Since then, it has dropped 5 percentage points. Because capital income is distributed more unequally than labor income, the decline in the labor share accounts for some, but not all, of the rise in inequality. CBO (2011) has estimated that 21 percent of the increase in inequality from 1979 to 2007 was accounted for by shifts between labor and other sources of income, with the remaining 79 percent accounted for by rising inequality within capital, business, or labor income. Nevertheless, the decline in the labor share has adverse implications for government revenues because wages and salaries are taxed at a higher rate than other major income sources.”

The reasons: “Proposed explanations for the declining labor share in the United States and abroad include changes in technology, increasing globalization, changes in market structure, and the declining negotiating power of labor. Changes in technology can affect the share of income going to labor by changing the nature of the labor needed for production. … Increasing globalization also puts pressure on wages, especially wages in the production of tradable goods that can be produced in emerging market countries and some less-developed countries. These pressures on wages can lead to reductions in the labor share. Changes in market structure and in the negotiating power of labor could also lead to a declining labor share. One such change is the decline in unions and collective bargaining agreements in the United States.”

About Real Time Economics

Real Time Economics offers exclusive news, analysis and commentary on the U.S. and global economy, central bank policy and economics. Send news items, comments and questions to the editors and reporters below or email realtimeeconomics@wsj.com.